What is the effect of oil price increase in the stock market?

There may be several effects. First determine what is causing oil prices to rise. Consumption? Wrong!! It is the drop in US interest rates, we have had 2 int. rate decreases totalling .75% in Oct./Nov., price of oil has gone up from $89 to $96 (roughly .78%). Oil is denominated in dollars, when dollar int. rates drop, dollar value drops, exporters want same intrinsic ';real margins'; as before so oil prices go up. This is not rocket science.


As oil prices increase, domestic costs such as gas, home heating, mfg and anything using petroleum will increase in cost. Hence, domestic inflation increases, more money comes out of peoples pockets for the same goods or services. Consumers start to pare back spending, industry feels the pinch and starts to cut back costs or further increase prices worsening consumer confidence or increasing inflation. If this situation is allowed to continue, or worse, snowball, we can fall into a recession.


The stock market's reaction is anticipatory, not reactive so if it did not see any fix on the horizon, the market will correct, meaning it sees no justification for maintaining current levels of investment values and decline by roughly 10%. Some industries may be spared because they are in a true growth mode. The oil industry in this case will probably benefit because they are margin based.


The best case for this scenario is to hope for a mild winter, less use of autos and no further decreases in US interest rates. Of course we could always hope for the great miracle: that the yum yums in DC decide to balance the budget and start reducing the deficit. This would take real pressure off the dollar and oil would drop to more sane levels.What is the effect of oil price increase in the stock market?
Oil company and oil substitute (coal) stocks will rise. Other will go down because economy slowdown. For more information about stock visit http://www.stockcpickguide.comWhat is the effect of oil price increase in the stock market?
gas will hit 4 bucks a gal in the U.S.
Less money available for other things, since gas is higher than historically. Great revenue for oil and oil service companies. At some point if and when gas hits maybe $5.00 per gallon, it could put us in a recession, expecially now that housing is in its own recession.

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